Check cashing agencies are well known as places where a person can convert a check to cash even though the person does not have money on deposit at the agency where the check is presented. If the check is cashed, the customer receives monies provided by the check cashing agency. The check cashing agency then submits the cashed checks for collection in a routine manner to the various banks on which they are drawn.
The decision to cash a check for a particular customer is based on the sound business judgment of the person operating the agency since there is virtually no prospect of recovery if a check is not paid when the agency submits it for collection.
"Check cashing" systems that are based on automatic operator machines that are associated with banks or other depository institutions are well known. However, these systems are actually "cash withdrawal" systems since checks are only cashed for persons who have funds on deposit at that institution. Thus, when the check is cashed, the amount of the check plus any service fee is deducted from the depositor's account.
Suitable identification is required before a check will be cashed at an automatic operator machine. Typically, check cashing will only be accomplished when the automatic operator machine recognizes the check and the customer has identification of a type which has been issued by the depository institution. Usually the identification is a card containing encoded information and a secret code entered by the customer.
The automatic operator machine system has served the community at large quite well. However, there are a substantial number of people who receive checks but who are not affiliated with a bank or other depository institution in which they can make deposits for the purpose of subsequent withdrawal.
To a large extent, these customers must rely upon traditional manually staffed check cashing agencies or check cashing services to convert their checks to usable currency.
Generally speaking, check cashing agencies are relatively scarce in most communities in which they could be advantageously located. Therefore, people who live in such communities are reluctant to accept payment by check. When they do receive a check such as a social security check, they must travel outside the community to cash it.